Before the weekend hit many traders rightfully closed out their positions on the prospect of the “unknown” surrounding the Greece debt situation in Europe. If a trader so happened to hold their position into the weekend on the short side of the ticket, then you started off your trading week (depending on the Euro pair) up a nice few hundred pips.
Headline risk from Greece including bank runs, ATM withdrawal limits, stock market closures and more had taken over the financial news which caused the Euro to make a significant gap down when trading opened in Asia on Monday morning. EUR/USD overnight however, and into NYC mid-morning trading hours has filled the down gap on a swift retracement back to where it ended Friday’s close. (see chart below).
EUR/USD Hourly chart showing the down gap and ensuing retracement successfully complete. Courtesy: FxPro cTrader
Now that the EUR/USD has retraced, what is next and what should brokers and traders be vigilant of with Greece headline risk causing all sorts of volatility across all markets? Some of the latest headlines you can check out below pertaining to the Greece situation:
– UBS sees 40% chance of ‘Grexit’, 40% chance of contagion
– Euro Erases Drop on Greece Amid Faith ECB Can Contain Fallout
– Photos: Greece’s Financial Drama
– If euro fails, Europe fails, warns Angela Merkel
– Greek Pensioners Await Outside Banks
– Greece Ignites Flight to Safety in U.S. Treasuries
– EU Urges ”Yes” Vote in Greek Referendum
– Nobel Laureate Joseph Stiglitz: Greece’s creditors have ‘criminal responsibility’ for chaos
Which ever way the Greek situation is settled, Eurodollar’s future still comes down to fundamentals regardless of Greece staying or going in this 5+ year long debt drama. Policy divergences between the ECB and Federal Reserve most likely will take center stage and many bank prognosticators have cited this the reason why they still believe another run at parity is in the cards.
The market is very decoupled Monday with the overall mood being “risk-off” but with the Euro having a relief rally from its starting gap down other pairs such as JPY pairs are still showing a huge gap from the open. See the below charts for USD/JPY and CAD/JPY with the gaps still not yet closed.
USD/JPY. Courtesy: FxPro cTrader
CAD/JPY. Courtesy: FxPro cTrader
This all has created an interesting dynamic in the Forex market to start this last week in June as we head into July. A couple of weeks ago LeapRate had learned of an uptick in volume to start the month from several senior executives within the brokerage industry. There is no doubt these last couple of weeks of June with increased volatility have added to the tickets being processed and across the Forex trading industry. Next week we will start to see those figures as volumes numbers report for June. It is shaping up to be a hot summer in the Forex market, contrast to last year when volumes were dampened with volatility at multi-year lows.